Tantárgy adatlap

A tantárgy szakmai tartalma: Course description:

The course will discuss recent developments in the broadly defined field of "Behavioral Economics" or "Economics and Psychology". As this is a new and very dynamic area of research in economics, there is no systematic connection between subjects (except that they have all been the objects of study by psychologists and economists too for quite a long time now). In each session we will give an overview of a specific topic and study in a more detailed way some of the most relevant papers in the corresponding literature. The list of topics is clearly not exhaustive; it is only meant to give an idea of potential subjects. Students should feel free to make suggestions about their preferences on topics. It will be a very interactive course, so attendants are expected to participate actively. Every student should present several papers from the given literature.
(See below)

You must know to make decisions. The series of questions "about whom, about what, when, with whom, with what, how" involve tensions very often. Managers and leaders of public administration permanently get in situations requiring decision at companies and in institutions. They should take into consideration the obstinate facts of rationality, but also that people are concerned, who love and hate, who are more timid or more aggressive, who are well intentioned or evil-intentioned. The leaders who make the decisions are not merely machines; they are actors affected by emotions of the game composed from many factors that we call economy. What should we take into consideration and how can we calculate with the economic effects of the emotions? Economics and theory of decision-making knowing only the ration and totally ignoring emotions in their explications left alone managers with these questions for a long time.

But in the last one-two decades there has been a revolution in economics and management sciences. Beside or instead of the individual following only self-interests appears the human in its integrity; the human, who is captive of passions, who is vain or blinded, aggressive or avenging, the human who has such virtues as devotion or temperance. In the economic and management theory the complete human embedded into society replaces cold reasoning of "Robinson", who makes always unambiguous decisions and vindicates his own interests without considering the interests of others.

In this new approach economic actors co-operate with others and get into conflicts, they apply strategies in their human games, retire and threaten, swindle and come to terms. It is not by chance that the game theory has such a great role in decision-analysis. Its importance has been recognized by Nobel-prizes, including the Nobel Prize of the Hungarian Janos (John) Harsanyi. But if not everything is decided by the individual, since others also contribute to the events, then incertitude necessarily replaces certitude and we should deal with uncontrollable positive feed-backs, chance and chaos instead of laws and calculable optimums when we try to know the background of the economic decisions. The new approach leads to changes in the techniques of the analysis as well: theory of probability and chaos theory, biological and thermodynamic analogies come to the fore replacing the traditional instruments being mainly analogue with the instruments of the mechanics.

We would like to present this new approach of economic decisions and processes on the course. This emerging variant of the economic analysis is not only more realistic then the cold geometry of the traditional decision theory, but it also offers more exciting observations. The course is series of lecture completed by discussions and students' presentations. Topics comprise different human emotions and attitudes - from vanity to envy, from infatuation to altruism. When developing these topics we try to preserve the analytical and rational approach of the economics.

Évközi tanulmányi követelmények: Over the semester attendance and classroom participation is obligatory, furthermore in class presentations, individual and team exercises, role-playing games, home assignments have to be sold; for a maximum of 45 points. There will be two Midterm written exams (in class) during the semester. The maximum obtainable points by those are 35 (15+20) points. An essay has to be written, (20 points). The number of maximally obtainable points is 100.

Vizsgakövetelmény: There is a credit generation system.
The number of maximally obtainable points is 100.
Final grade: <60= fail, 60-69 = pass, 70-79 = satisfactory, 80-89 = good, 90-100 = excellent.

Az értékelés módszere: See it above.

Tananyag leírása: Topics and reading list
1. Course introduction.
Introductory lecture on behavioral economics.

2. What is behavioral economics?
Readings:
Arrow, Kenneth, "Rationality of Self and Others in an Economic System," in Hogarth and Reder, (eds.) Rational Choice (1987).
Simon, H. "Rationality in Psychology and Economics," in Hogarth and Reder, (eds). Rational Choice (1987).
Sen, A. "Rational Fools: A Critique of the Behavioral Foundations of Economic Theory," 4. Choice, Welfare and Measurement. Cambridge,
Mass.: MIT Press, 1982.
Schwedberg, Richard: Socioeconomics and The New 'Battle of the Methods': Towards a Paradigm Shift. The Journal of Behavioral Economics, Summer 1990.
Elster, Jon (1993), Some unresolved problems in the theory of rational behaviour, Acta Sociologica 36 (3): 179-190.
Available: http://www.geocities.com/hmelberg/elster/ar93supi.htm
Camerer, Colin, F. (2005): Behavioral Economics. Prepared for the World Congress of the Econometric Society, 2005, London 18-24 August 2005.

3. Emotion and ration in economic decisions - limits of rationality. Rehabilitation of the emotions

Readings:
Conlisk, John [1996]: Why Bounded Rationality? Journal of Economic Literature, June, Vol. 34, Issue 2, pp. 669-701. Simon, H. A. [1986] Rationality in Psychology and Economics, The Journal of Business, Vol 59, No 4, Part 2, pp. S209-S224
Kahneman, D, Tversky, A. - (1982) The Psychology of Preferences. Scientific American, 246, Jan., pp. 160-173.
Elster, Jon (1996), Rationality and the Emotions, The Economic Journal, 106 (438) : 1386-1397.
Available: http://www.geocities.com/hmelberg/elster/AR96RATE.HTM
Rick, Scott and Loewenstein, George F. (2007): The Role of Emotion in Economic Behavior (January 3, 2007). Available at SSRN: http://ssrn.com/abstract=954862
Berezin, M.: Emotions and the ecomomy: Center for the Study of Economy and Society Working Paper Series #12, Cornell University Department of Sociology, 2003.

4. Role of benevolence and malevolence in the economic behavior
4.1 Envy, malice.
Readings:

Brenner, R. [1991]: From ‘Envy and Distrust’ to ‘Trust and Ambition’ – Eastern Europe’s Problems: How to Solve it and Why it May Take Long. Rivista di Politica Economica, June.
Heath, J. [2006]: Envy and efficiency. Revue de philosophie économique, 13.
Zizzo, D. J. [2007]: The Cognitive and Behavioral Economics of Envy. Prepared for Richard H. Smith (ed.), „Envy: Theory and Practice”, Oxford University Press (Affective Science Series), forthcoming.

4.2 Altruism and economic network
Readings:
Stephens, C. [1996]: Modeling Reciprocal Altruism. British Journal for the Philosophy of Science, Vol. 47, No. 4, December, pp. 533–551.

Simon, H. A. [1993]: Altruism and Economics. The American Economic Review, Papers and Proceedings of the AEA, Vol. 83, No. 2, May, pp. 156–161.

5. The role of social preferences
5.1 Social Preferences
Readings:
Fehr, E. – Fischbacher, U. (2002): Why Social Preferences Matter – The Impact of Non-Selfish Motives on Competition, Cooperation and Incentives.

5.2 "Our vanity is that spurs us". Hierarchy and marketing
Readings:

Khalil, Elias L.: Nonlinear Thermodynamics and Social Science. Modeling Fad Cycles, Cultural Development and Identificational Slips. American Journal of Economics & Sociology, October 1995.

Sandler, T. – Tschirhart J. T. [1980]: The Economic Theory of Clubs: An Evaluative Survey. Journal of Economic Literature, pp. 1481–1521.

Jaeger, W. K (2004): Status Seeking and Social Welfare: Is There Virtue in Vanity? SOCIAL SCIENCE QUARTERLY, Volume 85, Number 2.


6. Herd behavior. Logic of group belonging.
Readings:
Schelling, Thomas: Micromotives and Macrobehavior. (1978), Vol. 1, 2, 7 –

Camerer, Colin: Progress in Behavioral Game Theory,'' Journal of Economic Perspectives 11, Fall 1997, 167-188.


6.1 Herd instinct and interest validation
Readings:
Banerjee, A. V.: A Simple Model of Herd Behavior. The Quarterly Journal of Economics, 1992, Vol. 107. No 3, August, pp. 797-817

Rook, Laurens (2006): An economic psychological approach to herd behavior. Journal of Economic Issues. Mar2006, Vol. 40 Issue 1, p75-95, 21p.


7. Behavioral Finance
Overconfidence, myopia.

8. Conventions, norms, habits in economic decisions

Readings:
Young, H. Peyton: The economics of convention. Journal of Economic Perspectives, Spring, Vol. 10. 1996. No 2, pp. 105-122

9. Happiness
Readings:
Frey, Bruno S. and Stutzer, Alois. What Can Economists Learn from Happiness Research? Journal of Economic Literature, Vol. 40, No. 2. (Jun., 2002), pp. 402-435.

Graham, Carol [2005]: The Economics of Happiness. Insights on globalization from a novel approach. World Economics. Volume 6, Number 3, pages 41 – 55.


10. Exit, Voice and Loyalty
Readings:
Hirschman, Albert: Exit, Voice and Loyalty, Harvard (1970) pp. 1-126

11. Trust and honesty, or fraud and corruption

Readings:
Akerlof, G. A. [1970]: The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics, Vol. LXXXIV, No. 3, August, pp. 488–500.

Buckley, R. – Wiese, D. S. – Harvey, M. G. [1998]: An Investigation into the Dimensions of Unethical Behavior. Journal of Education for Business, Vol. 73, Issue 5, May/June, pp. 284–291.

Corchón, L. C. [1992]: Tax evasion and the underground economy. European Journal of Political Economy, Vol. 8, pp. 445–454.

Shleifer, A. – Vishny, R. W. [1993]: Corruption. The Quarterly Journal of Economics, August, pp. 599–600.

Jens Beckert: Trust and the Performative Construction of Markets. Paper presented at the annual meeting of the American Sociological Association, Hilton San Francisco & Renaissance Parc 55 Hotel, San Francisco, CA,, Aug 14, 2004.

Niklas Luhmann: Familiarity, Confidence, Trust: Problems and Alternatives. In: Gambetta, D. (ed.): Trust. Making and Breaking Cooperative Relations. Oxford, Blackwell, 1988.

12. The economic Logic of Crime
Readings:
Ehrlich, I. [1973]: Participation in Illegitimate Activities. A Theoretical and Empirical Investigation. Journal of Political Economy, Vol. 81, May/June, pp. 521–575.

Block, Walter, Kinsella, Stepfan N, Hoppe, Hans-Hermann: The Second Paradox of Blackmail, Business Ethics Quarterly, Volume 10, Issue 3, pp. 593-622

12.1. Violence and power - Theory of the Mafia
Readings:
Gambetta, Diego: (2000) ‘Mafia: The Price of Distrust’, in Gambetta, Diego (ed.) Trust: Making and Breaking Cooperative Relations, electronic edition, Department of Sociology, University of
Oxford, chapter 10, pp. 158-175.
Gaviria, Alejandro: Increasing Returns and the Evolution of Violent Crime: The Case of Colombia (1998) UCSD Department of Economics, Discussion Paper No. 98-14


13. The economic background of crimes in the transitory societies

Readings:

Klevorick, A. K. [1995]: The economic theory of crime and the problems of a society in transition. International Journal of the Economics of Business, July 1, pp. 345–357.

Half, C. [1997]: The Russian Mafia. The Challenge of Reform. Harvard International Review, Vol. 19, Issue 3, Summer, pp. 52–57.

Hamori, Balazs: Dog Strategies in the Transition Economies, Business Horizons; Sep/Oct 99, Vol. 42, Issue 5, p 47, 8p, 2 charts, 1 map

14. Knowledge, learning, adaptation - the economy of curiosity
Readings:
Swan, Jacky A. [1995]: Exploring knowledge and cognition in decisions about technological innovation: Mapping managerial cognition. Human Relations, Vol. 48, No. 11

Órarendi beosztás: One class/Week, four contact hours each

Kompetencia leírása: We would like to present this new – namely behavioral economic - approach of economic decisions and processes on the course. This emerging variant of the economic analysis is not only more realistic then the cold geometry of the traditional decision theory, but it also offers more exciting observations. The course is series of lecture completed by discussions and students' presentations. Topics comprise different human emotions and attitudes - from vanity to envy, from infatuation to altruism. When developing these topics we try to preserve the analytical and rational approach of the economics. V

Félévközi ellenőrzések: Midterm papers, twice in a Semester, Article presentation is mandatory, once in a Semester at least

A hallgató egyéni munkával megoldandó feladatai: Presentations

Szak neve: 

Irodalomjegyzék:
Kötelező irodalom:

• See it above

Ajánlott irodalom:

• See it above